BANQUO’S GHOST NOT AT THE FEAST: WHEN A KEY WITNESS IS NOT CALLED – THE INFERENCES A COURT WILL DRAW

There is an interesting discussion of the role of the “absent witness” in the judgment today of Mr Justice Kerr in O’Hare -v-Coutts & Co [2016] EWHC 2224 (QB). There are dangers in a party not calling someone who is clearly a key witness in a case. The presence of relevant documents is not a panacea.

“The “general rule” in CPR rule 32.2(1)(a) remains that “any fact which needs to be proved by the evidence of witnesses is to be proved … at trial, by their oral evidence given in public”. The approach commended by Leggatt J in Gestmin is very useful, not least in this case, but does not licence failure to prove the correctness of a disputed documentary record”

KEY POINTS

A party who was wished to object to documents being used at trial should serve the appropriate notices under the Civil Procedure Rules.

The failure of a party to call a key witness in its own defence could lead to adverse inferences being drawn against that party.

Oral evidence remains important in commercial cases. The fact that documents exist does not mean that a witness should not be called; the absence of a witness could lead to little weight being given to the documents.

The fact that a witness no longer works for a party is not, in itself, a good reason for not calling a witness.

THE CASE

The claimants brought an action against the bank alleging negligence advice was given in relation to certain investments. The claimants had been advised, in some cases, by the defendant’s then employee Mr Shone. The defendant did not, however, call Mr Shone to call evidence.

(The claimants were unsuccessful because the judge concluded that the investments selected were not, in the circumstances, a negligent choice.The case serves as a warning that honest witnesses can still lose cases).

THE JUDGMENT

“Coutts is a bank of high repute, which provides private banking services to, among others, high net worth individuals such as the O’Hares. Their relationship with Coutts began in 2001, after Mr O’Hare heard about their private banking services through a business acquaintance on a golf course in Scotland. Mr O’Hare was soon introduced to Mr Kevin Shone, a private banker at Coutts’ Liverpool office, who became their main contact and relationship manager from 2001 until he left Coutts in 2008.

The O’Hares opened accounts with Coutts in August 2001. Straight away, Mr Shone recommended a product called Orbita Capital Return (OCR). The O’Hares invested $3 million into it, of which $1 million was cash and $2 million borrowed from Coutts. This later led to a complaint of mis-selling, which is indirectly relevant to the settlement agreement issues. Mr Shone reported to his credit committee that Mr O’Hare was “very keen” to make this investment and “keen” to consider “leveraging the [pension scheme]”.

Coutts’ case was that this keenness resulted from Mr O’Hare’s sophistication and experience as a substantial investor, and owed little or nothing to Mr Shone’s salesmanship and powers of persuasion. The O’Hares submitted that Mr Shone was a persuasive salesman who described the O’Hares as “keen” to denote his success in persuading them to accept his recommendations to invest in more high risk products than they would otherwise have favoured.

Mr Shone, indeed, in his documents repeatedly thereafter attributed keenness to Mr O’Hare to make investments which he, Mr Shone, recommended as suitable, but without mentioning any impetus from himself in engendering Mr O’Hare’s keenness.

Mr Shone’s Absence

It is necessary at this point to interrupt the narrative and address the difference between the parties about whether Mr O’Hare took the lead in asking for particular types of investment, showing his experience and sophistication as an investor and his appetite for gambling and high risk, or whether Mr O’Hare was led and persuaded by Mr Shone to make higher risk investments than was consistent with Mr O’Hare’s unconditioned risk appetite.

Mr Shone was not called to give evidence. Mr O’Hare was. Coutts did not dispute that Mr Shone was a material witness and that its solicitors had identified him as such, though before contacting him. The only explanation for his absence was in a late witness statement, which I allowed, from Mr Dylan Williams (of Coutts) saying that Mr Shone told Mr Williams in 2016 that he was too preoccupied with other business responsibilities, following the death of his business partner, to devote time to these proceedings.

Ms Oppenheimer, for Coutts, submitted correctly that Mr Shone’s hearsay notes are admissible as evidence of the truth of their content (see the White Book 2016, vol. 1, note at 32.2.4). Thus, there is admissible hearsay evidence to be derived from the notes that Mr O’Hare and not Mr Shone drove the content of the investments the latter said were suitable.

She went on to submit that despite Mr Shone’s absence from the trial, they should be preferred to Mr O’Hare’s evidence given in writing and at trial. In support of that, her main points were to the following effect:

(1) A party cannot be expected to call a material witness who is not willing and co-operative, by using a witness summons. The court cannot assume that Coutts is aware what Mr Shone would have said, if he had been called by Coutts.

(2) The court cannot assume that the witness’s reason for non-cooperation is that his evidence is unreliable. The only evidence before the court is that Mr Shone has given a reason for not giving evidence, which is not that his evidence is unreliable.

(3) In a commercial context, contemporary written evidence should normally be treated as more reliable than self-serving oral testimony, as Leggatt J pointed out in Gestmin v. Crédit Suisse[2013] EWHC 3560 (Comm), at paragraph 22.

(4) “[I]f the witness is an unknown quantity, because he does not wish to assist voluntarily and would require to be summonsed, ex hypothesi nothing can be concluded from that about the evidence he would have given had he been called” (Coutts’ closing skeleton).

(5) If Mr Shone were to be called under compulsion of law, it is no more incumbent on Coutts to call him than the O’Hares. Indeed, they did call his counterpart and successor during the period from 2008 onwards, Mr Raymond Eugeni who like Mr Shone is a former Coutts private banker.

(6) Although privilege was not waived and Coutts was aware Mr Shone was a material witness, this is not a case like other leading cases where the absent witness is co-operating with or even controlling the party choosing not to call him (cf. Djibouti v. Boreh[2016] EWHC 405 (Comm) per Flaux J at paras 55-56; Prest v. Petrodel Resources Ltd[2013] 2 AC 415).

(7) This was a case in which, to borrow Lord Lowry’s words in R. v. Inland Revenue Commissioners and another [1991] 2 AC 283, at 300: “the silent party’s failure to give evidence (or to give the necessary evidence) can be credibly explained …. [thus] the effect of his silence in favour of the other party, may be either reduced or nullified”.

(8) The most that can be said is that court can enquire whether a party can reasonably be expected to call the absent witness who might be expected to have material evidence to give on an issue in an action: cf. the first of Brooke LJ’s four propositions in Wisniewski v Central Manchester Health Authority [1998] PIQR 324, at 340). I note that these four propositions were cited and applied in Jaffray v. Society of Lloyds[2002] EWCA Civ 1101; (2002) 146 S.J.L.B. 214, per Waller LJ (judgment of the court) at paragraph 407.

(9) Mr O’Hare’s evidence was unreliable and at times evasive. It was not (in Ms Oppenheimer’s words) “open, honest, credible and consistent”, virtues claimed for his evidence by Mr O’Doherty, for the O’Hares. She said he had been caught out in mistakes, had to retract certain statements and sought to downplay his appetite for investment risk; and that his evidence was “not always candid”, for example about recent contact with Mr Shone which he said he rejected.

Mr O’Doherty, for the O’Hares, made the following main points in answer to those submissions:

(1) Mr Shone’s absence was particularly telling because Coutts’ witnesses lacked any first hand knowledge of his involvement and produced documents prepared by him with which they were often not familiar, about meetings they had not attended, while Mr Shone had.

(2) Mr Shone met Mr O’Hare and spoke to him by telephone many times, often without documenting these discussions; no other Coutts witness was able to contradict Mr O’Hare’s account which, moreover, was honest, frank and reliable in its essential content.

(3) It was not established that Coutts had been unable to obtain a written statement from Mr Shone; their advisers had not denied contacting him. And Coutts had evidently decided not to prepare a witness summary or a hearsay notice stating, for example, that his notes of meetings and conversations (such as they were) were full, accurate and reliable.

(4) It was reasonable and practicable for Coutts to have called him; he was a UK resident still working in the financial services industry. Coutts’ unspoken objective must have been to frustrate an application for permission to cross-examine him, and to prevent a proper evaluation of his documentary evidence.

(5) It was unreal to expect the O’Hares to call him as a witness; they had made allegations of serious professional negligence against him. The party reasonably expected to call him was the party with an interest in defending his exercise of professional skill and care. The O’Hares had no need to call him, since without him their account was uncontradicted on crucial points in the history.

(6) The position of Mr Eugeni was different and the comparison was not of like with like: he is, unusually, working with and for Mr O’Hare in current business ventures; while Mr Shone had left Coutts, without any falling out, to join another financial services provider, Goldman Sachs.

(7) Coutts has had no difficulty calling as witnesses Ms Amy Barlow, Mr Andrew Savill and Mr Richard Carney, all like Mr Shone ex-employees of Coutts or its parent, Royal Bank of Scotland (RBS). It has clearly chosen not to exercise its right (if he was unwilling to attend voluntarily) to require Mr Shone to do so.

“The fact that a witness no longer works for a party does not in itself strike me as being a particularly good reason for failure to produce evidence from such a witness. It may of course make it more difficult to trace such a witness and/or to secure their cooperation but I have no evidence that either of those issues was a problem.”

(9) The reason Mr Shone gave Mr Williams for not giving evidence was neither credible nor first hand; the court has evidence that he gave that reason to Mr Williams, but not that it was the true or only reason why he has chosen not to defend his professional reputation in these proceedings.

In my judgment, it was obvious from the start of the proceedings that Mr Shone was a pivotal witness of fact in relation to the period from 2001 to 2008. If not called at trial, he would plainly be the Banquo’s ghost at the feast. No competent adviser would overlook that, and Coutts’ solicitors not surprisingly recognised his importance by listing him as a potential witness in their (pre-trial) directions questionnaire.

It is not suggested that Mr Shone’s notes are fabricated or deliberately false. What is said is that they mislead by omission, because they omit the process of exerting influence over Mr O’Hare’s decision-making; and that they exaggerate his appetite for risk in its initial and natural state, when unconditioned by salesmanship. In the absence of evidence from Mr Shone to the contrary, I have to assess that issue mainly by reference to the notes themselves, which are contemporary, the surrounding circumstances, and my assessment of other witnesses, particularly Mr O’Hare.

Ms Oppenheimer suggested that the evidence showed Mr Shone was uncooperative, but I may have an incomplete picture because Coutts did not waive privilege. She told me on instructions that Coutts’ solicitors did not contact Mr Shone before listing him as a potential witness in the directions questionnaire. She did not tell me about what pre-trial contact with him, if any, took place after his name was included in the questionnaire.

I am therefore not privy to whatever dialogue may have taken place under the cloak of privilege, if any. Ms Oppenheimer did not say that none did. The only other evidence I have is what he said to Mr Williams in early 2016. That is to the effect that he was too busy with his business responsibilities to devote the time required. He found time, however, to attend a charity event at Buckingham Palace on 17 May 2016, where he met Mr Williams and the proceedings were mentioned.

The citations from case law above do not all deal fully with the statutory provisions and rules which interact with judicial dicta on the drawing, or not, of an adverse inference where a material witness is not called. Section 1 of the Civil Evidence Act 1995 (the 1995 Act) abolished the rule against the admissibility of hearsay in civil proceedings. Section 2 tempered that, subject to rules of court, with a notification obligation on a party proposing to adduce hearsay, to enable the other party to deal with the hearsay evidence.

The court was made the arbiter of any pre-trial issues arising from proposed use of hearsay at trial. By section 2(4)(b) a failure to comply with relevant procedural obligations relating to hearsay “may be taken into account …. as a matter adversely affecting the weight to be given to the evidence in accordance with section 4”. The procedural obligations relating to hearsay evidence are now set out in CPR rules 32 and 33.

The general rule is that evidence at trial is given orally by the witness who proves a fact (CPR rule 32.2(1)(a)). Where hearsay evidence is intended to be given in a witness statement or orally, a statement of the evidence in writing must be served (rule 33.2(1) and (2)). In this case, the hearsay was clearly given in the statements of witnesses called orally, notably Ms Barlow and Mr Thomas, whose statements recited Mr Shone’s meetings with Mr O’Hare simply by referring to the former’s notes, which were implicitly adopted as true and accurate.

I therefore find no relevant procedural failure on Coutts’ part. It was for the O’Hares to apply, if they chose, under rule 33.4 to call Mr Shone for the purpose of cross-examining him on his notes of the various meetings and telephone calls, and his notes of his submissions to the credit committee of Coutts. They did not do so, relying instead on the fact that Mr O’Hare’s account of the relevant discussions is, in many but not all cases, uncontradicted by any other person present.

“All documents contained in bundles which have been agreed for use at the hearing shall be admissible at that hearing as evidence of their contents, unless (a) the court orders otherwise, or (b) a party gives written notice of objection to the admissibility of particular documents.”

Mr Shone’s notes formed part of the agreed bundle and thus were admissible as evidence of the correctness of their content. In the absence of any failure to comply with procedures required under the CPR, it is unnecessary to consider here the interrelationship between the CPR and paragraph 27.2 of the Practice Direction (considered by Norris J in First Subsea Ltd v Balltec Ltd [2013] EWHC 1033 (Pat), reviewing earlier Court of Appeal authorities).

No procedural failure, therefore, falls to be taken into account under section 2(4)(b) of the 1995 Act as a matter adversely affecting the weight to be given to Mr Shone’s notes and other documents. Notice of objection to them being admitted in evidence was not given. If it had been, the court might have required Mr Shone’s presence for the purpose of cross-examination as a condition of them being admitted in evidence.

Nor was there any obligation on Coutts to serve a witness summary relating to Mr Shone’s evidence. CPR rule 32.9 permits a party who is unable to obtain a statement from a witness it wishes to call, to apply for permission to serve a witness summary, setting out the evidence that would have been included in a written statement from the witness, had the party been able to obtain one, or if that is not known, setting out the matters about which the party wishes to ask the witness.

There is therefore no procedural difficulty about the admissibility of Mr Shone’s hearsay notes. What weight should be given to them is a different question. Section 4(1) of the 1995 Act requires me to “have regard to any circumstances from which any inference can reasonably be drawn”, including but not limited to the various matters listed as (a) to (f) in subsection (2).

The first is whether it would have been “reasonable and practicable” for Coutts to have called Mr Shone (section 4(2)(a)). In this case, that question is closely linked to the last factor, “whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight” ((f)). I shall return to these in a moment.

The second ((b)) is whether the original notes of Mr Shone were made contemporaneously. Clearly, they were made at or shortly after the conversations they evidenced. For the most part, they do not involve “multiple hearsay” ((c)). They do attribute remarks and views to Mr O’Hare, but he was a witness and thus could be asked about them, enabling me to assess their content as part of my assessment of his credibility.

As to section 4(2)(d), did Mr Shone have “any motive to conceal or misrepresent matters”? The O’Hares submit – but Coutts strongly disagrees – that Mr Shone had an interest in creating a paper trail in order to conceal manipulation of Mr O’Hare’s risk appetite, and to make his consent to investments appear more fully informed than it was; coupled with a motive to sell Coutts’ products, to make money for Coutts and, indirectly, himself.

It is not suggested that Mr Shone’s original notes were “an edited account, or … made in collaboration with another or for a particular purpose” (section 4(2)(e)). That leaves section 4(1) and section 4(2)(a) and (f) of the 1995 Act, already mentioned. I bear in mind the following further matters.

First, I do not accept that the O’Hares could be expected to call Mr Shone as a witness just as much as Coutts. Coutts’ hearsay evidence from Mr Shone is primarily relevant to a defence against the negligence claim. He is the person alleged to have given negligent advice in 2007 and 2008. I would expect evidence from him in rebuttal of that proposition to come from Coutts, rather than evidence in support of it to come from the O’Hares.

The fact that, unusually, the O’Hares were able to call Mr Eugeni, does not alter the reasonable expectation that a witness would be called by the party against whom there is a case for the witness to answer. He is still working in the financial services industry in this country. He has a reputation to protect. There is no evidence that he is medically unfit. I would expect him to answer the charge of negligence by giving evidence for the party facing that charge.

Next, I bear in mind the importance of the evidence he could have given. He was the only person present at sparsely documented meetings with Mr O’Hare which, Coutts says, were properly documented by Mr Shone and have been misrepresented by Mr O’Hare. The soundness of the documentary record was put to Mr O’Hare in tough cross-examination, and relied on in submissions. Yet Mr Shone did not vouch for the accuracy of his documents, nor attest to Mr O’Hare’s account being misleading.

Further, the settlement agreement issue arises because (as is common ground) Mr O’Hare complained that Mr Shone had mis-sold him the OCR product; and Coutts was, on its own case, prepared (though on what basis is disputed) to part with money to address that complaint. Coutts denied that the OCR product was mis-sold. The issue was part of the background to the claims arising from the 2007-8 investments. Mr Shone’s evidence about OCR would have been relevant.

Mr Shone’s explanation for declining to give evidence willingly, as reported to Mr Williams, is effectively that he, Mr Shone, was too busy. I am not confident that the explanation given to Mr Williams was a comprehensive or accurate statement of Mr Shone’s reasons for not wanting to give evidence. There is no document from him giving detailed reasons for not wanting to testify. There is no explanation about why he does not trouble to protect his reputation in court.

I do not accept that the need for Coutts to compel him by summons to give evidence and thus call him “blind” (as Ms Oppenheimer put it) is a complete answer to his absence from the witness box at trial. She said that to call him blind would be unsatisfactory. However, it is not clearly proved (and probably could not be without a waiver of privilege) that a witness summons would have been necessary. Mr Williams’ hearsay account of Mr Shone’s explanation does not satisfy me of that.

Ms Oppenheimer cited from the judgment of Christopher Clarke J (as he then was) in Portal v 3M[2010] EWHC 114 (Comm) at paragraph 32. When the judge there said there that to call a witness blind was “perilous and unsatisfactory”, he was recording counsel’s submission, not endorsing it. The context was completely different: the potential witnesses were subject to confidentiality obligations which prevented them from cooperating with the party wishing to call them, even if they wished to. Mr Shone was under no such restriction.

Ms Oppenheimer suggested that it was more difficult to call a former employee than a current one, who could be “strongly encouraged to give evidence”, while Mr Shone “is not anyone who’s under Coutts’ control”. But Coutts had no difficulty (in line with what Judge Saffman said in Webb, cited above) in calling other former employees outside its “control” to give the second hand hearsay evidence that would have been first hand had it come from Mr Shone.

It is clearly to be inferred from the inclusion of Mr Shone’s name in the pre-trial questionnaire, that Coutts’ experienced and expert legal advisers assessed the potential benefits and risks of calling him, if necessary under compulsion of law, and concluded that the risks outweighed the benefits. It is not correct that they had no idea at all what he might say. Other things being equal, he could be expected at least to affirm that what he wrote was not misleading.

The observations of Leggatt J in Gestmin (cited above) at paragraph 22 do not resolve the issue here. He carefully qualified his remarks about documentary evidence by saying they do not mean oral testimony serves no purpose. He did not seek to elevate the status of documentary evidence above that of oral evidence. The “general rule” in CPR rule 32.2(1)(a) remains that “any fact which needs to be proved by the evidence of witnesses is to be proved … at trial, by their oral evidence given in public”. The approach commended by Leggatt J in Gestmin is very useful, not least in this case, but does not licence failure to prove the correctness of a disputed documentary record.

I agree with Ms Oppenheimer that the court cannot know what Mr Shone would have said, had he been called. That is always so when a witness with relevant evidence to give is not called. I think Coutts and not the O’Hares are the main victims of that submission, since it is Coutts and not the O’Hares that needs his testimony to assist its defence. Without him, significant parts of Mr O’Hare’s account remain uncontradicted except by notes that are disputed and not defended by their maker.

I am, nonetheless, invited to prefer the contemporaneous notes to Mr O’Hare’s oral and written evidence that they are materially incorrect and misleading. This has to be considered on a point by point basis but, as a general proposition, I am not prepared to accept that the notes are always to be preferred and that Mr O’Hare’s evidence contradicting them must invariably be rejected. This is for two further reasons, beyond what I have said above.

The first is that I find Mr O’Hare to be an honest and truthful witness, although his recollection was not always accurate, as he was the first to admit whether or not against his interest. I do not accept that his evidence was profoundly unsatisfactory, as Ms Oppenheimer submitted. He was cheerfully candid about admitting mistakes and being corrected. And, unlike two of Coutts’ witnesses, Mr Thomas and Mr Williams, he did not answer questions after considering what type of answer would best (in the witness’s judgment) assist his cause.

Ms Oppenheimer suggested he was at times evasive in his answers. She cited the example of his answers to questions about recent contacts with Mr Shone about proposed business relations. I reject the suggestion that his answers were evasive. In my judgment his discomfort about being asked the questions reflected not a reluctance to tell the full story but, rather, a wish to restrain himself from speaking of Mr Shone in inappropriately strong pejorative language.

Nor do I accept that the absence of contemporary responses from Mr O’Hare disputing the content of Mr Shone’s communications tells greatly against his credibility. He trusted Mr Shone at first, and had no reason to engage in guarded and cagey written exchanges with him. He is a man of few emails, of few words in writing but many said orally.

His style is not the cautious compliance-influenced one of creating a documentary record in case of later need. He would not have thought to dispute Mr Shone’s written account until his investments started to lose money. Even then, when he complained about OCR, he did so verbally in a meeting and did not follow up with formal correspondence.

The second, and linked reason, is that I accept Mr O’Hare’s basic proposition that Mr Shone used persuasion on him. I interject that this is not necessarily a criticism of Mr Shone or Coutts; provided the products sold are suitable, there may be nothing wrong with using selling techniques. That is part of Coutts’ raison d’être and that of any bank. But Mr Shone’s notes repeatedly describe Mr O’Hare as “keen” to buy the products, without mentioning the exertion of persuasion or influence by Mr Shone or anyone else at Coutts.

That seems to me wholly unrealistic. Clearly, it is not the habit of Mr Shone to document the persuasion part of the exercise. That is not because there was none. Mr Croft, the expert witness instructed by Coutts, stated in his evidence that he would expect Coutts to be looking for product sales to the O’Hares. That is obviously right. The contract governing the parties’ relations (with the O’Hares in their personal capacity) required as much, if Coutts was to profit from its dealings with them.

There was internal email evidence from within Coutts of a sales drive in 2007 in respect of the Novus products, in which the O’Hares invested in 2007 and 2008. The sales drive is not mentioned in any of the typed notes. In a document dated 29 January 2008 (I do not accept the date is an error and should be 2009, in view of Mr Shone’s letter sent the same day) someone unidentified, probably from Coutts, has written “Novus Funds pushed heavily”. The typed notes do not reflect this evidence of persuasive techniques being used.”

Like this:

Related

One Response

truthaholics · September 9, 2016 at 15:33:40 · →

Reblogged this on | truthaholics and commented:
“KEY POINTS:
* A party who was wished to object to documents being used at trial should serve the appropriate notices under the Civil Procedure Rules.
* The failure of a party to call a key witness in its own defence could lead to adverse inferences being drawn against that party.
* Oral evidence remains important in commercial cases. The fact that documents exist does not mean that a witness should not be called; the absence of a witness could lead to little weight being given to the documents.
* The fact that a witness no longer works for a party is not, in itself, a good reason for not calling a witness.”